In Brief (TL;DR)
Selling a jointly owned home is a process that requires paying off any remaining mortgage and dividing the remaining cash between the partners according to their ownership shares.
Let’s explore how to handle paying off a potential mortgage and how to correctly divide the remaining cash.
Learn how to pay off any remaining mortgage and correctly divide the remaining cash between the partners.
The devil is in the details. 👇 Keep reading to discover the critical steps and practical tips to avoid mistakes.
Selling a jointly owned home is a crucial step in a couple’s life, whether they are bound by marriage or in a domestic partnership. This decision, often linked to new plans or the end of a shared journey, brings with it emotional, but above all, legal and financial implications. The division of the proceeds is the heart of the matter and requires clarity, agreement, and a thorough understanding of current regulations. Approaching this process with awareness allows for a fair and transparent transition, protecting the interests of both partners and turning a potential conflict into an opportunity to close a chapter peacefully.
The procedure varies significantly depending on the legal bond between the partners and the marital property regime they have chosen. For married couples, the distinction between community property and separate property is fundamental. For domestic partners, however, the ownership shares indicated in the deed of purchase become crucial. Understanding these differences is the first step to navigating the complexities of the sale and ensuring that the division of the profit correctly reflects the rights and contributions of each person.
Home Ownership: The Legal Foundations
When a couple buys a property, the foundation of everything is the deed of sale, the notarial document that certifies who the owners are and in what shares. For married couples, the chosen marital property regime comes into play. In the absence of a different choice, the legal community property regime automatically applies. Under this regime, all purchases made after the marriage, including the home, belong to both spouses 50/50, even if the deed is in only one of their names. The alternative is the separation of property, where each spouse remains the sole owner of the assets they purchase individually.
For unmarried domestic partners, the situation is more straightforward: ownership is determined exclusively by what is stated in the deed of purchase. If the property is jointly owned, the ownership shares (usually 50% each) are specified in the deed. This difference is crucial because, without a marital bond, there is no automatic legal regime governing ownership. Mediterranean culture, and Italian culture in particular, sees the home as the heart of the family, a lifetime investment. However, modern social dynamics require greater attention to legal tools to protect individuals within the couple.
The Sales Process: A Journey for Two
To sell a jointly owned property, the consent of all owners is required. The decision must be unanimous; it is not possible to proceed if even one partner is opposed. Once an agreement is reached, the process follows the steps of a normal property sale: property valuation, hiring an agency, accepting a purchase offer, signing the preliminary contract, and finally, the notarial deed of sale. During this process, the notary acts as a guarantor, verifying the legitimacy of the ownership and the compliance of all documents.
But what happens if an agreement cannot be reached? If a co-owner opposes the sale, the only way to break the deadlock is through legal action. The person who wants to sell can petition the court for a judicial partition of the property. The judge will assess whether the property can be physically divided (for example, a duplex). If this is not possible, as in the case of an apartment, the judge can order a forced sale of the property at auction, with the proceeds then divided among the co-owners according to their shares. This solution, although effective, involves long timelines and significant costs, as well as a likely devaluation of the property.
Paying Off the Mortgage: The First Step After the Deed of Sale
If there is a joint mortgage on the house, paying it off is an absolute priority at the time of sale. Both partners are jointly and severally liable for the debt to the bank, which means the financial institution can demand the entire payment from either of them. The most common and safest solution is to use part of the sale proceeds to completely pay off the remaining debt. This transaction is usually handled by the notary on the day of the deed of sale. The notary withholds the necessary amount, pays it to the bank on behalf of the sellers, and obtains the release of mortgage, thus freeing the property from any liens.
There are alternatives, although they are more complex. One is mortgage assumption by the buyer, who agrees to take over the existing financing. This option, however, requires the explicit consent of the bank, which will assess the new debtor’s financial reliability. Another possibility, in the event of a separation, is for one of the partners to assume the entire mortgage, becoming the sole owner of the property. In any case, it is essential to carefully plan how to sell a house with an outstanding mortgage and perhaps calculate the remaining debt to have a clear financial picture.
Dividing the Proceeds: How Is the Profit Split?
Once the mortgage is paid off and all sale-related expenses (agency commissions, taxes, notary fees) are covered, the crucial moment arrives: dividing the net proceeds. The general rule is simple: the remaining sum is divided among the owners based on the ownership shares indicated in the deed of sale. If the house was jointly owned 50/50, the profit will be split in half. If the shares were different, for example 70/30, the division will follow the same proportion. This principle applies to both spouses with separation of property and to domestic partners.
A tax aspect not to be underestimated is the possible capital gains on the sale. A taxable capital gain is generated when a property is resold at a higher price than its purchase price within five years. The tax does not apply if the property was used as a primary residence for most of the time or if it was received through inheritance. If the capital gain is taxable, the owners can choose between ordinary income tax (IRPEF) or a substitute tax of 26%, to be paid through the notary at the time of the deed of sale.
Tradition and Innovation: New Agreements for Modern Couples
The traditional Italian family model, based on marriage with community property, reflected a unified view of assets. The house was the family’s asset, and its 50/50 division was the natural consequence of this pact. However, society has evolved. Modern couples, particularly unmarried domestic partners, are increasingly seeking innovative tools to regulate their financial relationships with greater flexibility and transparency, protecting individual contributions. An example is when one partner invests a larger sum for the down payment or for a major renovation.
To meet these new needs, the law offers solutions such as cohabitation agreements. Drawn up before a notary or a lawyer, these agreements allow partners to define in advance the rules for managing common assets, including how the proceeds will be divided in the event of a home sale. It can be established, for example, that ownership shares are not equal or that, in case of a sale, documented personal investments are reimbursed first. These tools represent a step forward, offering protections for domestic partners and allowing them to overcome the rigidity of traditional rules.
What to Do in Case of Disagreement?
Disagreement over the sale of a jointly owned home or the division of proceeds can turn into a long and costly conflict. Before going to court, there are alternative ways to resolve the dispute more constructively. Mediation is one of them. A professional and impartial mediator can help partners communicate, understand each other’s needs, and find a satisfactory agreement for both, such as one partner buying out the other’s share or defining a shared sales plan.
If mediation fails, the only remaining option is judicial partition. This legal procedure, initiated at the request of one of the co-owners, leads to a decision imposed by a judge. As mentioned earlier, the judge can order the property to be sold at auction. It is a definitive but often disadvantageous solution: public auctions tend to fetch lower prices than the market rate, and legal costs can further erode the final profit. For this reason, reaching an amicable agreement is almost always the wisest choice from an economic and emotional standpoint.
Conclusions
Selling a jointly owned home and dividing the proceeds is a complex operation that intertwines legal, financial, and emotional aspects. The key to managing it successfully lies in transparent communication and making clear agreements, preferably from the moment of purchase. Whether for spouses or domestic partners, understanding the implications of the property regime and ownership shares is essential to avoid future misunderstandings and conflicts. The old saying “clear agreements make good friends” has never been more relevant.
Relying on professionals such as notaries, lawyers, and financial advisors is a crucial investment to navigate this path safely. From managing the remaining mortgage to correctly dividing the profit, including tax obligations, expert guidance ensures that every step is executed correctly, protecting the rights of both partners. With the right preparation and a collaborative approach, it is possible to transform the sale of a shared home into a fair and peaceful process, ready to open the door to a new future.
Frequently Asked Questions
When a jointly owned house is sold, the net proceeds are divided among the owners according to the ownership shares indicated in the deed of purchase. If the property is titled 50% to each partner, the amount remaining after paying off the mortgage and sales expenses will be divided equally in half. Any different agreement, for example, to recognize a larger investment by one partner, must be formalized to be legally valid.
Selling a house with an outstanding mortgage is common practice. At the time of the notarial deed of sale, a portion of the sale price is used to completely pay off the remaining debt with the bank. The notary oversees this operation, ensuring the bank receives the amount due and releases the mortgage lien. The sum of money left over after paying off the mortgage and expenses is then divided between the co-owners.
Legally, the division of proceeds follows the ownership shares, regardless of who paid more for the purchase or renovation. To get reimbursed for the extra amounts paid, a written agreement (like a private agreement) is necessary where both partners acknowledge the larger contribution and establish a different distribution. In the absence of a formal agreement, it is presumed that the larger contribution was a form of gift or donation, which is difficult to recover.
No, for the division of proceeds from the sale of a jointly owned property, it makes no difference whether you are married or unmarried partners. The only thing that matters are the ownership shares established in the deed of purchase (rogito). Whether you are spouses with separation of property or a domestic couple, the division of the net profit will always be based on those percentages.
In most cases, no taxes are paid. The capital gains tax (i.e., the profit made from the sale) is not due if the property was used as a primary residence for most of the time between purchase and sale. The tax is required, however, if you sell a property (that is not a primary residence) within five years of purchase, as it is considered a speculative transaction. The substitute tax rate is 26%.
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